Senator Mark Warner (D-VA) and Senator Baxby Chambliss (R-GA) discussed their bipartisan effort to cut spending by $4 trillion over the next decade with Chris Wallace on "Fox News Sunday." Senator Chambliss explained that one way to do this without raising taxes is by reforming the tax code, which has successfully worked under the Reagan and Bush Administrations.

CHRIS WALLACE: A bipartisan effort to find an answer to the nation's growing and dangerous debt problem. We talk to two senators behind the effort right after the break.

WALLACE: While the president and congressional leaders continue their deadlock over what to do about the nation's debt, two senators are working on a bipartisan plan to cut $4 trillion over the next decade.

WALLACE: The key to your plan, you say, that everybody has got to have some skin in the game. For you as a Republican, Senator Chambliss, that means agreeing to the politically unpalatable increases in revenue. Are you willing to increase taxes?

CHAMBLISS: Well, we can increase revenues without increasing taxes, per se, Chris. And as a matter of fact, that our proposal does is to reduce the effective and direct tax rates all the way across the board. And we do that by making a significant reform in the tax code. And every time, we've made a significant reform in the tax code, whether it was under Reagan in '86 or Bush in 2001, what we've seen is reduction in rates and increase in revenue.

WALLACE: What you're basically talking about is doing away with about $1 trillion in deductions that are currently in the tax system. But Grover Norquist, head of the conservative group Americans for Tax Reform, says what you're talking about means that you're still breaking your pledge -- and he's obviously going to hold this against all Republicans who support it -- breaking your pledge not to raise taxes.

CHAMBLISS: Well, let me just say we're joined on my side in these discussions by Senator Tom Coburn of Oklahoma, Senator Mike Crapo of Idaho who just been designated by "National Journal" as three of the most, if not the most conservative members of the United States Senate. We don't believe in raising taxes.

But let me tell you, Chris -- this is such a massive problem. As Senator McConnell just stated, a $14 trillion debt, that if we don't get our arms around it now, and then we're going to become a second tier nation. And we cannot allow that to happen.

So, it's imperative that we put everything on the table for discussion. I don't know where we are going to wind up. We're not there yet.

But if you look at the debt commission report, you have to address spending. We have to reduce spending in a major way. You've got to address entitlements. We've got to reform entitlements in a major way.

And you've got to look at revenue and reform our complicated tax code in a major way. And when you do that, everybody does have that skin in the game and everybody gets their score just a little bit.

WALLACE: All right. Well, let me bring in Senator Warner.

For you, as a Democrat -- having a skin in the game means that you have to take the politically unpalatable choice of cutting entitlements. As a Democrat, are you willing to scale back on benefits for Social Security and Medicare and Medicaid?

WARNER: Well, you see? We have to do this because otherwise, if we focus the discussion as we have so far on the back and forth in Congress, all you're cutting is 12 percent of the federal budget, the domestic discretionary spending. And you are seeing actually good programs perhaps being eliminated because you focus the discussion only in that area.

You got to put everything out. That means Saxby and I are probably going to take some arrows -- he on the Republican side and he, because we're taking, willing to take on reforming some of these entitlement issues. But every day that we punt, every day that we don't act, we add $4 billion to our national debt. At some point, we're going to have to pay that back.

So, why not now go ahead and put a plan in place -- we didn't get in the situation overnight. We're not going to dig out in a single year. But if we put a plan in place, I think the markets will respond and I actually think the economy will be better. But that's going to require a little give from both sides.

WALLACE: But the Democratic leader in the Senate, Harry Reid, said this recently: "Social Security has contributed not a single penny to the deficit. So, we can talk about entitlements as long as you eliminate social security from the discussion."

First of all, isn't that wrong? Social Security is already paying out more than it takes in and that's just going to get worse as the baby boomers retire. Isn't that as a fact wrong that it doesn't contribute the deficit? And secondly, can Social Security really be off the table?

WARNER: Well, Chris, until recently, Social Security has actually been running major surpluses. In effect, we've been borrowing from Social Security to finance the government. Now that's clicked over on an annual basis -- as you said, we're paying out more than we're taking in.

What the debt -- what our proposal puts out is not taking Social Security proceeds any longer and paying off the deficit. It's saying let's make sure Social Security is solvent for the next 75 years. If we don't do it - -

WARNER: Well, my sense is, you know, remember Social Security was put in place back in the '30s. They set 65 as the period -- the start, because life expectancy was 64. Now, Americans, thank goodness, are living towards closer to age 80.

And the idea that we're going to slowly raise the retirement age a couple of years over the next 40 years -- nobody, you, me, Saxby, we're not going to be effected at all. Folks under 35 might see a slight bump in their age increase, but frankly, a lot of folks under 35 don't even think there's even going to be Social Security if we don't do something in this.

WALLACE: Senator Chambliss, how close are you to an actual comprehensive plan? There is talk that what you are thinking about is a set of specific proposals that you would come up with targets for spending, for revenue, for entitlements. And that if they are not met by subsequent congresses, there would be automatic triggers to cut spending or to increase revenue. Is that where you're headed?

CHAMBLISS: Well, Chris, first of all, what we've got to do is when we see an increase in revenues coming in to Washington, we got to make sure that Congress doesn't have the ability to spend that, because history dictates to us if we have revenues coming in that are uncontrolled, that's what's going to happen. What we're going to make sure of and, frankly, one of the major issues that we're dialoguing about in our group now is what do we do with the revenues.

We need to make sure that we commit the most significant part of those revenues to tax reduction, tax rate reduction. Get our corporate rate down to where we are competitive in the world marketplace. Get our individual rates down to where people actually do pay less in taxes.

If you are one of the 70 percent that don't itemize, you will certainly pay significant amount less in taxes.

And then we've got to take a portion of that -- the debt commission said somewhere between 20 percent, 15 percent, 10 percent and apply it to this $14 trillion debt. Otherwise, if we don't commit some of it to that, we're going to be stuck with this $14 trillion debt and it's only going to increase. And that's not right.

WALLACE: So, Senator Warner, how close are you to an actual plan, and for instance, because we talked about this a lot with Senator McConnell, will you offer it as part of the debate over raising the debt limit in the next couple of months?

WARNER: I think we want to make sure we get it right more than some arbitrary timeline. I really think -- I want to commend Saxby Chambliss. He's been a great partner.

We've been saying, listen, we got to do this. We shouldn't allow this work of the debt commission, the so-called Simpson-Bowles commission to go for naught. We're willing to kind of link arms and we have other colleagues who are working with us. I think you are seeing a whole lot of other members in both parties say we need this long-term solution.

I get a little worried when you start tying it to the debt limit vote, because as Chairman Ben Bernanke of the Federal Reserve said, if we play Russian Roulette with that, with the instability in the financial markets, if we were to default on America's obligation to pay, you could up seeing back in the financial crisis the way we were in 2008.

WALLACE: But are we talking about something this year, next year?

WARNER: If we get into next year, you get into a presidential year and this whole issue would probably be punted until 2013. We may not have that long of a time before the financial markets say we're going to either no longer want to buy American debt or charge such a higher interest rate on it, it would have dramatic negative effect on the economy.

WALLACE: Senator Chambliss, we have less than a minute left. I want to ask you, because, obviously, one of the questions is: whatever you guys come up with, you got to sell it to Congress. You're one of Speaker Boehner's closest friends, I know, here in town. Would he back a compromise that included revenue -- any revenue increases? And do you think these Tea Party freshmen would?

CHAMBLISS: Well, I think it's a matter of -- not a matter of is it going to get done. Are they going to back it? It's a question of whether we do it on our terms. And I think at the end of the day, we're going to have to have within the discussion, within the room, a discussion between the White House and House Republicans and Democrats.

John Boehner is a great leader. John Boehner is about the business of bringing our fiscal House back in order. He gets it.

So I think at the end of the day, we'll be able to develop a plan that -- we've got to develop a plan that does fit within the parameters of the House Republicans and Democrats, as well as Senate Republicans, Democrats, and the White House.